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DOL Issues Proposed Changes To Salary

Wednesday, July 1, 2015

DOL Issues Proposed Changes to Salary Amount For Exempt Employees

Yesterday the Department of Labor (DOL) issued its proposed change pertaining to the rule governing exemptions from overtime pay.  For now, the DOL is proposing only one change, which is to increase the salary amount.  According to the DOL, the salary level is the strongest indicator of whether a position is properly classified as exempt from overtime.  The DOL rationalizes that the lower the level of salary, the more likely that it is not an exempt position.  By contrast, the higher the salary amount, the greater the likelihood that the position is properly classified as exempt.  


The proposed salary amount more than doubles the existing threshold level.  Currently, for an employee to be exempt from overtime pay, s/he must be paid on a salary basis and the salary amount must be at least $23,660 annually, or $455 per week.  Under the proposed rule, the salary would increase to $50,440 annually, or $970 weekly.  For highly compensated employees, the DOL proposes increasing the salary amount from $100,000 to $122,148 per year.  Going forward, on an annual basis, the amount would automatically increase.  


This is a substantial increase that will have a significant financial impact on employers.  DOL data suggest that approximately 11 million workers who are currently classified as exempt earn a salary well-below the proposed amount.  If the proposed rule becomes final, this means employers will either incur the costs of increasing the salary amount of exempt employees or reclassifying the employees as non-exempt, and thereby, incurring overtime costs. 


In addition to the proposed changes to the salary amount, the DOL is inviting public comment on whether changes to the duties are necessary, and if so, what types of changes.


Released by: Employer's Resource Association
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Posted by: B. Hedrick

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